Markets. The Fair, Isaac & Co. San Francisco has given its name to the ” FICO score “, a rating that has played an important role and yet often ignored in the sub-prime crisis of 2008. Assigned to each household in the United States, and the fruit of the reflections of two applied mathematicians at the Stanford Research Institute, William Fair and Earl Isaac, FICO has contributed since his debut in 1989 to give an aura of scientificity to the assessment of credit risk in the loan for consumption to u.s. households.
The FICO is based on data collected by three major credit bureaus, private sector organizations, which gather in huge databases, records public of the monthly instalments paid by households.
The rating scale ranges from 300 to 850 points. Statistical studies had convinced the lenders that the level of 620 was a threshold to distinguish between borrowers with ” prime “, that is to say, the right ” rembourseurs “, whose rating exceeded this figure, subprime borrowers “, the ” bad ” appropriations, and therefore at risk, whose rating was lower.
Practices unusual can be explained always by the vicissitudes of history. This is to combat racial discrimination in the allocation of the credits to housing that was passed in 1975, the Equal Credit Opportunity Act, which required the refusal of a loan to be ” based on empirical data and valid on a statistical plan “. The release of records of African-Americans do appear more like profiling, but as the objective reflection of the unfavourable economic situation of this category of the population…
“Strength of character” of the borrower
The scientific character of the approach adopted to build the FICO came to reinforce a cultural vision of the Us, according to which the ability of households to repay…